Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm First Quarter Fiscal 2015 Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded January 28, 2015.
The playback number for today's call is 855-859-2056. International callers, please dial 404-537-3406. The playback reservation number is 5550146 7. I would now like to turn the call over to Warren Kneeshaw, Vice President of Investor Relations. Mr.
Kneeshaw, please go ahead.
Thank you, Brent, and good afternoon, everyone. Today's call will include prepared remarks by Steve Mollenkopf, Derek Haberle and George Davis. In addition, Christiane Aman, Murthy Rinducintala and Don Rosenberg will join the question and answer session. An Internet presentation and audio broadcast accompany this call and you can access them by visiting our website at www.qualcom dot com. During this conference call, we will use non GAAP financial measures as defined in Regulation G and you can find the related reconciliations to GAAP on our website.
I'd also like to direct you to our 10 Q and earnings release, which were filed and furnished respectively with the SEC today and are available on our website. During this conference call, we will make forward looking statements regarding future events or the future business or results of the company. Actual results or events or results could differ materially from those projected in the forward looking statements. Please refer to our SEC filings, including our most recent 10 Q, which contain important factors that could cause actual results to differ materially from the forward looking statements. And now to comments from Qualcomm's Chief Executive Officer, Steve Mollenkopf.
Thank you, Warren,
and good afternoon, everyone. We delivered a strong quarter, achieving record revenues and non GAAP operating income. QCT shipped a record number of MSM chipsets and delivered our highest ever revenue and earnings before tax. QTL operating performance was ahead of expectations and I am pleased to report that we have resolved our previously disclosed dispute with a large Chinese licensee. We are continuing to cooperate with the NDRC as it conducts its investigation and believe it is progressing toward a resolution.
During the quarter, we also returned approximately $2,400,000,000 to stockholders through dividends and buyback activity, consistent with our increased capital return targets. Turning to QCT, our first fiscal quarter was very strong with revenues and MSM chip shipments up 14% and 27% year over year respectively. MSM MSM chip shipments were at the high end of our expectations as we saw broad strength across multiple OEMs driven by demand in emerging regions and strong device replacement in the U. S. While our outlook for the first half of the fiscal year is ahead of our prior expectations, our QCT forecast for the second half of the fiscal year has been reduced due to a number of factors.
First, we are currently seeing a shift in share among OEMs at the premium tier, which has reduced the near term addressable opportunity for our Snap Snapdragon processors and has skewed our product mix toward more modem chipsets in this tier. 2nd, we now expect that our Snapdragon 810 Processor will not be in the upcoming design cycle of a large customer's flagship device, impacting our outlook for both volume and content in that device. And thirdly, although we had a very strong competitive position exiting fiscal 2014, we are seeing heightened competition in China at the mid and high tiers. We are continuing to gain share year over year with OEMs based in China, but not at the pace we had previously expected. This is in part due to some product challenges with 1 of our chips in meeting some of the more demanding design points of those tiers.
This has provided an opening to competitors who are being very aggressive in order to establish a position in the marketplace, resulting in more pricing pressure than previously expected. We have already addressed many of the initial product challenges in order to support early customer device launches in these tiers and are continuing to further enhance the performance of this chip. As a result, we continue to expect to see a broad range of devices successfully launch and drive volume with this chip. We estimate that these factors will impact our QCT revenue growth and operating margins through the near term product cycles. However, despite these near term factors, our view of the long term strategic environment Snapdragon 810 Processor remains robust with more than 60 products in the pipeline, including the recently announced LG G Flex 2 and the Xiaomi Mi Pro Note.
Snapdragon 810 is performing well and we look forward to a growing number of devices to be launched by our customers throughout the year. Snapdragon 810 delivers 64 bit CPU capability using licensed technology and is fabricated in 20 nanometer. As you know, the use of internally designed custom CPUs has been a core part of our strategy that has worked well for some time. With the 810, we made a conscious decision to use license scores to accommodate the accelerated shift to 64 bit. The competitive landscape has underscored the importance of differentiation associated with our internal custom designs and looking ahead our next premium processor will use our own 64 bit custom CPU architecture as well as the most advanced process node.
We expect this product to sample in the latter half of calendar twenty fifteen. In China, the expanded FDD licenses increased competition between carriers and the accelerated pace of LTE device penetration aligns with QCT's LTE leadership. We believe we are well positioned going forward for 3 primary reasons. First, we expect a modem transition driven by LTE Advanced including uplink carrier aggregation will drive a new device design cycle beginning later this year, which our road map anticipates. 2nd, we will drive our road map to advanced performance nodes to enable us to competitively address the opportunities ahead.
And finally, we are differentiated both in terms of features and scale, which will allow us to help OEMs based in China meet the specification and deployment challenges related to expanding their businesses outside of China. For Qualcomm overall, our longer term growth drivers remain strong both in smart phones and adjacent areas where our mobile technologies and capabilities can bring next generation solutions, areas such as automotive, Internet of Things, mobile computing, networking, small cells and data center solutions. At the Consumer Electronics Show, it was clear that many industries looking to leverage mobile technologies into their products and businesses are looking to the leaders in mobile such as Qualcomm for support creating an Internet of Everything. We demonstrated a broad set of products and equipment that are already shipping with Qualcomm solutions inside, including the areas of automotive, smart home, smart city, networking, mobile healthcare and wearables. On a related note, the very strong results of the AWS 3 spectrum auction here in the U.
S. Reinforces the need to continue to invest in cutting edge modem technologies that provide great user experiences while helping operators improve their return on the spectrum asset investments. We are very well positioned to enable operators and OEMs to bring new spectrum bands online as quickly and as broadly as possible with technologies such as advanced carrier aggregation. I would like to now turn the call over to Derek Averly.
Thank you, Steve, and good afternoon, everyone. QTL delivered a strong quarter with revenue and earnings ahead of expectations and total reported device sales of $56,400,000,000 which was slightly above the midpoint of our prior guidance. I am also pleased to report that we have resolved the dispute with the major Chinese licensee that we previously disclosed. Importantly, we were able to successfully resolve this dispute despite the pending NDRC investigation. In addition to the licensee agreeing to report and pay royalties on past unreported sales, the resolution includes an expansion of the existing license agreement to include royalty bearing licenses for 4 gs only products, including 3 mode LTE smartphones sold for use in China.
We believe the licensee has fully reported its September quarter shipments in our 1st fiscal quarter and we expect the licensee to report in our 2nd fiscal quarter a catch up for units that were sold in periods prior to the September quarter, but were not previously reported due to the dispute. We continue to believe that some of our Chinese licensees are not reporting all of their sales of licensed products. We have increased the number of audits that we are conducting of these licensees and are attempting to resolve the instances of under reporting. While we always prefer to resolve these types of issues amicably with our licensees, we are of course prepared to enforce our rights under our license agreements if that becomes necessary. Although we continue to sign new 4 gs only and other license agreements including in China and the recent resolution of the licensee dispute gives us even greater confidence that we'll be able to collect royalties over time on substantially all LTE device shipments, including 3 mode devices in China and other currently unlicensed products, OEMs supplying a meaningful portion of 3 mode devices and lower tier 3 gs connected tablets remain unlicensed.
We are in discussions with many of these OEMs and are making progress, but we expect it will take some time to conclude all of the negotiations. As to the NDRC investigation, we are continuing to engage and fully cooperate with the NDRC as it conducts its investigation. We have discussed with the NDRC a number of proposals for addressing its concerns and we believe we are making progress towards a potential resolution. Having said that, the timing and outcome of any potential resolution remains uncertain as does the potential impact on our future business in China. Now let me provide an update of our view of global 3 gs, 4 gs device demand.
We're seeing demand for 3gs4gs devices continue to grow at a very healthy pace. And we have increased our calendar 2014 global 3gs4gs device shipment estimate to approximately 1,350,000,000 units, up approximately 25% year over year. As a reminder, this includes those devices we expect to be reported to us through the 1st calendar quarter of 2015, as well as our estimates of unreported and unlicensed device sales, but excludes TDS CDMA devices that do not implement LTE. The broad availability of compelling devices at the mid and low price tiers in emerging regions is driving strong demand for and migration to 3 gs, 4 gs devices. We're also seeing an increase in the replacement rate of devices in the United States.
Looking forward, we are also increasing our estimate for calendar 2015 global 3 gs, 4 gs device shipments. We now expect approximately 1,500,000,000 to 1,600,000,000 units to be shipped during 2015, up approximately 11% to 19% year over year, with a bias towards the high end of the range, driven by continued positive upgrade trends in the United States and accelerating migrations to 3 gs, 4 gs devices in China and other emerging regions. As we explained last quarter, several factors primarily related to challenges in China are currently causing shipments reported by our licensees to be less than the global 3 gs, 4 gs unit shipments I just explained. For calendar year 2014, we are increasing our estimate of reported 3 gs, 4 gs devices to between 1,135,000,000 and 1,175,000,000 units, which is approximately 200,000,000 units below the global 3 gsfour gs device estimate of approximately 1,350,000,000 units at the midpoint. This represents our current view of unreported and unlicensed activity for calendar year 2014 and after adjusting for resolution of the dispute is in line with our prior expectation of the percentage of global device shipments that we expect to be unreported or unlicensed.
Turning to estimated 3 gs, 4 gs device ASPs. The ASP of devices reported to QTL during the Q1 of fiscal 2015 was approximately $197 at the midpoint. The sequential decline in the reported ASP was primarily driven by a weaker premium tier in the September quarter ahead of new flagship launches, heavier price reductions of certain handset models, additional reported units from the Chinese licensee whose dispute we resolved and foreign exchange effects. In the 2nd fiscal quarter, we expect both the global and reported ASPs to be higher sequentially as the strong holiday season at the mid and high tiers more than offset some additional foreign exchange headwinds. We expect the reported ASP will be significantly impacted by the dilutive effects of catch up units sold during several prior periods that we expect to be reported in the Q2 as a result of resolution of the licensee dispute.
We are now forecasting global 3 gs, 4 gs device ASPs to decline approximately 12% to 13% year over year in fiscal 2015 instead of our previous estimate of 9% to 10%. With the delta being driven by stronger than expected unit growth in emerging regions, the September quarter pause in the premium tier, increased OEM competition and mix shifts and negative effects of foreign exchange, which alone contributes approximately $2 of the ASP decline. Within this overall view, we are seeing relative stability in developed region ASPs as well as increasing ASPs from Chinese based OEMs. In total, we expect global 3 gsfour gs device sales in fiscal 2015 to be up approximately 6% to 9% over fiscal 2014 global 3 gs4 gs device sales, which is in line with previous expectations as the growth in volume from an increase in the replacement rates in the U. S.
And accelerated emerging region migration offsets moderately increased ASP declines, including the expected impact of foreign exchange headwinds. To conclude, we continue to see strong 3 gsfour gs device demand from both higher replacement rates and faster 2 gs to 3 gs4 gs migration. We are pleased to have resolved the previously disclosed dispute with a major Chinese licensee and we remain focused on resolving our remaining challenges in China. That concludes my comments. I will now turn the call over to George Davis.
Thank you, Derek, and good afternoon, everyone. Our first quarter results came in above expectations on better than expected operating performance from both QCT and QTL. Fiscal first quarter revenues were a record $7,100,000,000 up 7% year over year and non GAAP earnings per share were $1.34 up 6% year over year. Non GAAP earnings per share were 0 point $2.4 midpoint of our prior guidance range. QCT accounted for approximately half of the upside on strong MSM demand and lower operating expenses, with the balance coming from improved total reported device sales, lower operating expenses in QTL and other businesses, as well as the reinstatement of the R and D tax credit.
In QTL, total reported device sales by our licensees were 56,400,000,000 dollars slightly above the midpoint of our guidance range, with an average selling price of $197 at the midpoint and reported shipments of 286,000,000 3 gs4 gs based devices at the midpoint. QCT achieved a number of records in the quarter, including shipments of 270,000,000 MSMs, revenues of 5.2 $1,000,000,000 and earnings before tax of $1,100,000,000 Revenue per MSM was lower sequentially as expected reflecting a greater mix of modems. QCT operating margin was 22% in the fiscal 1st quarter reflecting strong MSM shipments and lower operating expenses. For the company overall, non GAAP combined R and and SG and A expenses were lower than our expectations, decreasing 3% sequentially, reflecting timing of certain program spending and cost initiatives in the quarter. Turning to capital structure.
During the first fiscal Q1, we returned approximately $2,400,000,000 to stockholders or 112 percent of free cash flow, including approximately $700,000,000 of dividends paid and approximately $1,700,000,000 in stock repurchases. As of the end of the 1st fiscal quarter, we had approximately $3,600,000,000 remaining of our stock repurchase authorization. Additionally,
since the
end of the first fiscal Q1, we have repurchased an additional 6,800,000 shares for approximately 500,000,000 Cash flow from operations was approximately $2,400,000,000 or 33 percent of revenues and we ended the fiscal Q1 with cash and marketable securities of $31,600,000,000 Our non GAAP tax rate was 18% in the fiscal Q1 and we now estimate that our fiscal 2015 non GAAP tax rate will be approximately 18%, slightly higher than our original estimates on business mix. Now turning to our guidance for fiscal 2015. Our revised financial guidance for the fiscal year reflects a reduced outlook for the QCT business in the second half of the fiscal year. We now expect 20.15 total Qualcomm revenue to be in the range of $26,000,000,000 to 28,000,000,000 dollars up approximately 2% year over year at the midpoint and lower than our previous guidance midpoint by $800,000,000 We now expect 20.15 non GAAP earnings per share to be in the range of $4.75 to $5.05 down approximately 7% year over year at the midpoint and down 6% from our previous full year guidance midpoint. We estimate fiscal 2015 QCT operating margins will now be in the range of 16% to 18%, which reflects a reduction of about 200 basis points at the midpoint.
Our QTL forecast for the fiscal year is modestly improved, driven by an improved TRDS outlook, partially offset by a modest increase in the impact of foreign exchange. We continue to expect that fiscal 2015 QTL operating margins will be approximately 85% to 86%. Combined non GAAP R and D and SG and A expenses are expected to grow approximately 3% to 5% year over year, in line with prior expectations. As a reminder, we continue to expect lower investment income in fiscal 2015 as compared to the strong investment gains reported in fiscal 2014 as we rebalance the risk levels in our investment portfolio. Looking to our guidance for the Q2 of fiscal 2015, we estimate revenues to be in the range of approximately $6,500,000,000 to 7.1 $1,000,000,000 up approximately 7% year over year at the midpoint.
We estimate non GAAP earnings per share in our 2nd fiscal quarter to be approximately $1.28 to $1.40 per share, up approximately 2% year over year at the midpoint. We anticipate 2nd fiscal quarter non GAAP combined R and D and SG and A expenses will be up 6% to 8% sequentially, reflecting normal increased seasonal expenses primarily related to employee payroll taxes. In QTL, we estimate total reported device sales of $69,500,000,000 to 75,500,000,000 dollars will be reported by our licensees in the March quarter for shipments they made in the December quarter, up approximately 9% year over year at the midpoint, reflecting the busy holiday season. We also expect to see a benefit from previously uncollected royalties for prior period approximately 220,000,000 to 240,000,000 units during the March quarter, down approximately 15% at the midpoint sequentially coming off the busy holiday quarter and up approximately 22% year over year at the midpoint. We expect revenue per MSM to be relatively flat quarter over quarter.
We expect QCT operating margin to be approximately 16% to 17% in the fiscal second quarter, lower sequentially reflecting the impact of lower seasonal volumes. That concludes my comments. I will now turn the call back to Warren. Thank you, George.
Brent, we are ready for
questions. Your first question comes from the line of James Faucette with Morgan Stanley. Please go ahead with your question.
Thank you very much. I guess I just want to focus on the operating margins for QCT, etcetera. Can you give a little bit of color on what's driving those down in the for the year? Like how you're having to spend additional funding or spend additional money versus just pricing pressure and that kind of thing? And then I'm also wondering if you can talk through more medium to long run, what you think your to do list looks like to recapture the lost share and better reassert yourself in the markets where you're feeling the most pressure?
Thank you.
Hi, James. This is George. Really the op margin effect in the near term that we're talking about is really typical seasonal coming off of a very of the strong December quarter. For the full year, the reduction of the 200 basis points we talked about is really a function of the change some of some of the OpEx benefit we saw in the first half was really timing of programs and so that will be in the second half of the year impacting margins as well.
And this is Steve. With respect to the medium tier or long term, I think I would view this more as a product cycle issue versus anything else. I mean, if you look at one of the hardest things for us to do is to project what the mix is going to be, whether we're going to sell a lot of thin modems or whether it's going to be Snapdragon processors. And I think the largest impact in terms of the change of the outlook is really due to the mix of products. As I said in my remarks, the 810 is actually doing quite well.
Any concerns about the 810 in terms of design traction really are probably limited to 1 OEM versus anything else. In the low tier in China, it's very competitive right now, primarily because there are a number of new entrants trying to get share. We think there will be a modem transition in the second half of this year and we are anticipating that. We think that will be a good strategy. I think long term though, I don't think we see a change in the competitive dynamic or even a change in the strategy of particular customers, we think more is more of a product issue.
Your next question comes from the line of Brian Modov with Deutsche Bank. Please go ahead with your question.
Yes. Steve off that last statement you made in terms of modem transition to the back half of the year, can you give us kind of more color around this? Is this still 20 nanometer? Is it going to be more than 16 nanometer? How is it going to be different?
And then what you're seeing competitively in China? Are you seeing competitors coming with something more than a 3 mode solution? Are you seeing something more advanced than that? And then on George, the questioner Derek, This licensee that you settled with in China, can you give us an idea of what the rates are for that licensee? Is it around your corporate average?
And does it include a single mode LTE as well and an ability to collect on that as well as collect on multimode that includes TD SDMA? Thanks.
So Brian in China, we're not seeing anything different than really 3 mode in China. We're not seeing much ability for the competitors to go outside of China. And we have anticipated that carrier aggregation would be important in China across tiers. And we think that that will happen here sometime in the second half of the year. It's always difficult to time transitions in China, but as you're aware, it's a pretty fast moving situation there.
If you look at really kind of year over year, we're still going to see share move up in China in these tiers. We just anticipated that it would grow even more. And I think that's exacerbated by the pricing pressure as I mentioned. And so we're looking forward to seeing a modem transition. We will follow that up with really thin set products eventually.
We are going to transition our existing products to more advanced nodes, but I'll try to keep some of that proprietary for us right now.
Brian, this is Derrek. Yes, we can't talk too specifically about the terms in the agreement including the rates. But I guess I'll just say that we're pleased with the resolution of the dispute. As I said, we believe that in this quarter, the licensee has now reported sort of the full volume that they are supposed to report under their agreement. They will also we expect to be reporting a catch up amount for prior period sales next quarter that will benefit for us.
And then, we were able to extend the scope of the agreement to your question to include LTE only licenses. This particular licensee was already licensed for 3 gs, but we've now extended that to include 4 gs only, including the 3 mode devices sold for use on China Mobile's network. So all in all, we feel very good about the result.
Your next question comes from the line of Tim Long with BMO Capital Markets.
Just one follow-up and another one if I could. If we could just go back to the maybe George the $800,000,000 revenue reduction and $0.30 in earnings, it seems like a pretty large incremental margin implied there. So maybe if you can just walk us through how there's that big of an impact on that type of revenue miss? And then I'd love the opinion of you guys on this Xiaomi Ericsson deal in India, where the you guys Xiaomi is allowed to ship with your products in there. Just curious what you think that means for the chipset business for the Chinese to export?
And does it mean anything for the licensing business and potential discussions with NDRC? Thank you.
Hi, Tim. This is George. So on the flow through issue, which is essentially seeing $0.30 off for the full year on what we're looking at. What you're really seeing is the fact that while we described kind of 3 themes in terms of impacting the second half of the year for QCT, it's really the themes that impact the premium tier that are driving the impact. And so the margin flow through impact on that revenue is in line with adjustment that we're talking about.
So it's really driven by the fact that the impact is happening at a place where we have strong operating margins.
Tim, this is Derek. Let me answer your question on Xiaomi. So I think we've consistently said that we believe that we're uniquely positioned to help the Chinese OEMs build their businesses outside of China. That comes obviously both from a product perspective in terms of our scale and ability to do that as well as the cross license rights that we've obtained as we've negotiated agreements over the years. And I think you're seeing some of that play
out now
in India. On the licensing side, I wouldn't draw any direct correlation to the NDRC, but what I would say is we've talked from time to time about tools that we have at our disposal, to deal with companies that are not complying with their agreements or not signing licenses. And I think you can look at what's going on in India as just one example of the tools that are available.
Your next question comes from the line of Mike Walkley with Canaccord Genuity. Please go ahead with your question.
Great. Thanks, Steve. Just for Steve going back to the QCT guidance. Can you update us on expectations for revenue per MSM that's implied in your guidance with the mix shift? And also just longer term on a bigger picture view with Qualcomm's long term business model really has been about increasing dollar content or revenue per MSM over time.
After this product cycle some of the misses do you think this metric can return to growth in fiscal 2016? Thank you.
Hey, Mike. This is George. On the outlook for the year, we haven't guided. But effectively what we did say it will be relatively flat quarter over quarter. And for the full year in the second half, again, pointing to the premium tier weighting of some of these issues, it'll have a dampening effect, but we'll just leave it at that.
Mike, this is Steve. Also in the long term, I would say that I'm not sure we see a difference in terms of what the market is looking for. In fact, I would suggest that even though our mix is probably more thin modem versus Snapdragon based, the overall market appears to be absorbing new technology quite rapidly, even to the point where it appears that perhaps even in certain tiers the replacement rate is improving because people are upgrading to a larger screen or what have you. We think that's a good trend for our business both on the licensing side as well as the chip side eventually. I want to be clear too.
I think the 810, we think is going to be quite strong in terms of design traction and there'll be in a lot of devices. As I said, it'll be over 60 devices. And it'll be interesting to see how it sells through. But we're definitely getting the sense that you still have to provide leadership technology in order to win.
Your next question comes from the line of Andrew Gelbloom with Citi. Please go ahead with your question.
Hey, guys. Can you hear me?
Yes.
Yes. Awesome. Thanks. Appreciate it. Couple of questions.
Can we just hit at the heart of the 810 issue? There's obviously been a lot of news in the press about overheating. And if we can just kind of hit on, your just want to confirm is it your opinion or thought process that the issues with that flagship device happened on a compatibility issue or incompatible issue between the A10 and that particular device and then any other device those issues are not a concern. If you can just give us a little detail on why that might be to let us kind of get a feeling as to that maybe there's nothing particularly wrong with the A10 per se, but that it just happened to be the match up with that one device that would be helpful. George,
the now that you
or Derek, now that you have that licensee signed up, can you give us a sense A, as to how large is this catch up going to be next quarter? And is that in guidance? So we can kind of take that out and get a sense as to what the pure guidance for next quarter would be without that catch up? And your new numbers for the recognized volume for 2014, I believe it was included is $20,000,000 higher than it was before. It's $195,000,000 is the delta between the recognized and unrecognized TRDSs, whereas now it's $195,000,000 last time it was $215,000,000 I don't mean to get too complicated.
But is that $20,000,000 improvement in the difference between the global TRDS and your recognized TRDS, is that all due to this one licensee? Thank you.
Hey, Hu, this is Steve. On the A10, I'll be very clear that device is working the way that we expected it to work and we have design traction that reflects that. I mean, if you look at the number of designs, it's over 60. It's essentially won all the premium designs across multiple performing. We there is a concern as you mentioned, it's really related to 1 OEM and I don't think you should extend that to imply that something has changed fundamentally between us and that OEM.
And of course that OEM has a number of different models that we feel well positioned across our entire product tiers. So I think that's going to be a great product for us. We are going to follow that up as I mentioned in my script with a device that returns to our internally developed CPU with integrated modem and are going at the latest node. So I don't think we see any change in strategy and we're quite pleased with that device. We just wish it had won one more
Hey, this is Derik. So you might recall that when we gave prior guidance, just given the amount of issues that were on the table and the uncertainty associated with the timing of resolution of each of those, we gave quite a wide range and said to get towards the higher end of the range we needed to resolve or make progress on several of them. So in essence, the resolution of the dispute was already baked into guidance from that perspective. The catch up payment is also effectively included within the guidance that we provided for Q2. On the math exercise, I actually figured somebody was going to ask this question.
So let me try to break it down for you. Remember, we gave quite a wide range of the underreported or unreported amount, because again there's uncertainty around exactly what that would be. And everybody kind of gravitated towards using the midpoint of $215,000,000 as the talking point, although we don't have any more confidence necessarily in the midpoint than we do in other parts of the range. And the way you get to the 2 15 is sort of assuming at the low end of the range there is no resolution with this particular licensee and at the high end of the range assuming that there would be full resolution. So the midpoint is actually something in between.
So when you actually try to deconstruct the math, it's pretty hard to get there. But let me just basically tell you that the net net of all this is, there's an improvement based on resolution of the dispute, so therefore less units being underreported. But also the overall end market, we believe is going to grow at a faster pace than we did during the last time we provided guidance. And so even though the percentage of units that we believe will be unreported is basically staying in line with our prior expectation. The actual number of units would have gone up, but for the resolution.
So the net net of it is it comes down, but it doesn't necessarily can't attribute the delta exactly to the amount that's resolved in the from the dispute.
Your next question comes from the line of Timothy Arcuri with Cowen and Company. Please go ahead with your question.
Thank you very much. Derek, just on that point about the increase in the TAM for 2014 and also 2015, Can you talk about what regions that that's coming from and maybe what portion of that is China? And then as a follow-up for George, just on capital return, The stock is down now sort of into the mid-60s here post market. You bought back $500,000,000 during January, which is the same run rate that you bought back during the entirety of calendar Q4. Yet it doesn't even really scratch the surface on really what you could do.
Is the thinking around more capital return just China and getting that resolved? Thanks.
Tim, this is Derik. So I think on your first question, really the growth in the market is primarily coming from a stronger view on emerging regions, which includes China, but it's not entirely China. So other regions such as India, Middle East and Africa and some others are contributing to that as well.
Hey, Tim. On capital return, obviously, we increased our program in this area substantially starting last year. And this quarter, we talked about returning over 112%, our minimum commitment being 75% return of capital. So we're pleased to be increasing in this environment. But we'll continue to focus on shareholder returns, but we're again not going to forecast our future repurchases other than we're committed to the return of capital commitments that we made in our program announcement last year.
Your next question comes from the line of Stacy Rasgon with Bernstein. Please go ahead with your question.
Hi, guys. Thanks for taking my question. I have 2. First, I want to take a little bit of exception to the your point that the Unitam is going up. It looks like the Unitam is going up for the global market, but your global ASPG guided them down quite a bit.
They were down 9% to 10%, now they're down 12% to 13%. It doesn't look like you took your estimates for the global market value up at all. So all of these units are coming in, but they're coming in at lower ASP and there's no revenue growth upside versus where you were modeling before. So I mean how should we be thinking about, I guess the impact of elasticity here in units and growth? And how do we think about the market growth going forward?
Secondly, I'd love to get some feeling I know you're enabling doing your best to enable the China OEMs to grow outside of China. Maybe you don't have any choice. So I'm just wondering is that a good thing to do? Maybe it gets back to that first point. What does it mean for the long term business as the China OEMs gain share outside of China and start to take share potentially developed markets with ASPs that are probably quite a bit lower than what you're enjoying there today?
Stacy, this is Derek. On the market growth, effectively, when you think back to the discussion we had in New York, really what we said is about 6% to 9% global TRDS growth. And we had a view on what ASPs would do throughout the calendar year. And but we also made the point that in 2014 2015 we really view this fundamentally as an elasticity of demand exercise and as ASPs come down that units would go up. So even if there was an increasing pressure or decline on the ASP in the next year or so that would drive higher units.
And essentially that's what we're seeing. Those two dynamics are playing out. The growth in the market overall from a TRDS perspective is in line with what we expected in New York earlier in the year, but it's just a little different mix in terms of units versus ASP. And you might recall, we did talk about a number of factors, which we think long term cause the ASP declines to moderate. And I think that also applies to your comment on the Chinese OEMs.
I think a couple of things we expect will happen over time. One is that there's going to be consolidation among the Chinese OEM base. There's just really too many players to sustain themselves long term. And as they as that happens as well as they become more successful outside of China invest in building their brand, invest more in R and D that there's no reason that their pricing profile would not be come more in line with what we're seeing from some of the other OEMs today. And actually we commented on that today in the scripts that we actually are starting to see Chinese OEM ASPs increase.
Stacy, this is Steve. I think also you should think about the Chinese OEMs really as being multiple tiers. I mean, we see a grouping that in many ways is filling in some of the gaps that are being left because some handset manufacturers that historically have been in the United States or Northern Europe or even in Japan have exited portions of the world. And they've been filled in largely by some of the higher tier Chinese OEMs and they have strong ambitions and they're really developing the assets to be able to do that. In addition, there's a lower tier product, which I think is being used really to drive the migration from 2 gs to 3 gsfour gs.
And both of those trends we think are good for our business.
Your next question comes from the line of Tavis Makaur with Raymond James. Please go ahead with your question.
Thanks. Steve, 2 for you. Just to clarify in your answer to Ehud's question on the large OEM, is that a product line that you'll be selling a thin modem into or no chipset at all? And then secondly, you mentioned or I guess hinted at a modem transition in China later this year. I suspect that's carrier aggregation.
Do you have any sense of your lead against your major competitor there on getting a carrier aggregation chip in that market? Thanks.
Travis, so it's Steve. I'll try to stay away from talking a lot about the different design dynamics in a particular OEM, in part because I'm not sure it's even been determined yet as to how that's going to settle out. And also it's just part of our we just don't talk about those things. But we did think it was important to disclose how it impacted our financials with respect to the 810. On carrier aggregation and I would say LTE feature set broadly, which is quite diverse as you probably recall from our trip in November to New York, we feel like we're in a very strong position not just in terms of feature leadership at the high tier, but we have moved carrier aggregation down in through the tiers.
And similar to what we did with the transition to 4 gs where we made a transition to make sure that we were there for that move in China, We think there'll be feature updates happening in China. We also believe that long term, you need to offer international markets to the Chinese OEMs because of the answer to the previous question. And therefore, you trip on the requirement to add new bands to add to support things like VoLTE and SRVCC, things that really stress the modem feature set. So we feel like we have a strong lead there. We are starting to see 3 mode competition come in, but we don't believe that to be enough of the feature set to really cause us to change our view of the strategic environment.
Your next question comes from the line of Koolbinder Gharsha with Credit Suisse. Please go ahead with your question.
Hi. Thank you for the question. My first question is for Steve, which is with this transition of the major OEM, I guess I know you've got a lot of A10 design wins, not reassuring. The issue being at the high end of the market, has become very clear in the last 3 or 4 years is there's 2 vendors. One of them doesn't use your Snapdragon.
The other one seems be deemphasizing it frankly. And so the issue here being is that if that condition prevails, you're kind of making a better market share in the high end, which is proved very hard to crack if there's somehow change. And what confidence do you have that therefore the A10 will drive an improving mix at some point 2 or 3 quarters. I'm trying to understand the dynamic of where the confidence comes from that it could be a good product for you in the business really? And then for Derek, my question is on the kind of resolution you've had with this one licensee in China, the lower end of your TDRS range has gone up by only $5,000,000,000 And so on the high end hasn't gone up, we probably anticipated maybe coming through.
What I'm trying to get is that has the outlook for the licensing opportunity in this resolution just deteriorated this year for various reasons whether it's ForEx or ASPs or mix and that kind of thing? Is that the right way of thinking about it excess resolution? Thanks.
Cool, Linda, it's Steve. So in terms of the long term, I think it's our view is that it probably won't consolidate to just 2 OEMs. And in fact, I think it would be broader than just 2 ecosystems will be successful in the mobile computing area. And I think even in the near term, if you were to look at a market or a region such as China and you would look at how the share has changed around over time, you've seen a number of different OEMs who have really taken share at the premium tier. They tend not to be household names in the U.
S. Or the developed world yet, but we think there's an opportunity for that to occur. In addition, I don't think you've seen things we haven't seen things settle out in terms of how the different ecosystems will play over a multiyear period. And I think if you look at the views that we have had over the years in terms of which OEM was going to win, we've been very, very hesitant to make a particular bet or a strategy based off of that. And just to shift shares between what's happened either Nokia or RIM or what have you over the years have really I think reinforced that to be the right place.
What we tend to do is drive technology. We tend to have an interest in technology and make sure that that's a key thing. Now we are very, very aware that as the market opportunity narrows because of a particular modem going better versus the AP, we have to watch that in terms of how we spend our investment and we're trying to do that judiciously.
Coleman, this is Derek. On the second question, really if you look at it, we like you said, we kept the high end of the reported TRDS range the same, but brought up the bottom end of the range by about $5,000,000,000 which would shift actually shift the midpoint up. And there's a bunch of puts and takes in that. Obviously, the resolution of the dispute would push it up, but there's also some offsetting factors with FX, ASP and units. So you can't necessarily triangulate the $5,000,000,000 just to the licensee dispute.
But the net net of that is actually probably a more positive not negative picture. And I would say kind of incrementally, we're feeling more positive about the outlook for the business in the fiscal year than in November even.
Your next question comes from the line of Tal Liani with Bank of America. Please go ahead with your question.
Hi, guys. I have questions about your cash position, U. S. Cash position. It declined year over year substantially from $8,700,000,000 to $4,100,000,000 if my numbers are right.
And that means that you will run out of domestic cash in the next 9 months or so if you burn the same amount of cash. So it also declined substantially sequentially. What's the puts what are the puts and takes in the cash burn? Is there anything else outside of dividends and buybacks that we need to consider? Then the second question is, assuming you're going to have access to more capital, whether it's through debt raising or repatriation even, whatever it is, what are going to be the uses of cash?
Are you going to increase the dividend substantially? Or do you have any set agenda on the right dividends if you have access more access to capital? Thanks.
So the consistent with what we said, the step up in our return of capital is going to draw down our domestic cash balance. And that's really what you've seen. We indicated either on the last call or at the analyst meeting, I believe it was on the last call, we'd actually be in the market raising debt in our 2nd fiscal quarter, which we still believe we will do. And again, really to try and maintain a cash balance in the $2,000,000,000 to $4,000,000,000 range at all times domestically for flexibility. But as you seen in 2014, we returned capital ahead of our minimum commitment of 75% closer to 100%.
And we're ahead of that in the first quarter having returned 112%. So it's really returning capital more aggressively in the form of share repurchase. Plus the last two dividend increases were 40% 20%, so significant increase in our dividend out lays as well, all part of our program that we talked about last year and are executing to.
Your next question comes from the line of Rod Hall with JPMorgan. Please go ahead with your question.
Yeah. Hi, guys. Thanks for taking my question. I guess you talked a lot about the Snapdragon and what's going on there and the redesign of the using your own core and so on. I wonder if you could talk a little bit about the second half of the year and the trajectory of the baseband business that's in modem business.
Do you think that you will do you expect to maintain share in the second half of the year? Do you think the share starts to slip a little bit as new competitors come on? Can you just walk us through kind of how you see share progressing on that through the year? And then I also I wanted to return back to this market growth question. Our model is now predicting a further deceleration of unit volume in 2016, so looking out another year.
And I'm just wondering, do you think that ASP declines like you're expecting this year continue on into that year? Are we looking at a year with even slower growth on the total market value? I know that's looking a long way down, but I'd be curious to know what you're thinking there on ASPs. Thanks.
Brad, this is Steve. So on share, I think what you're really seeing is a change in mix versus a fundamental share picture in QCT. You tend to see more thin modems versus Snapdragon processors. And as everybody is working through changing their portfolio to respond, I think, to a very strong player in the premium tier, that's changed the mix of products. And then in addition, I would say in China, we're going to see share gains year over year, but not as much as we had expected.
It's pretty competitive in terms of the environment there. But it's really more a mix story versus a share story.
Rod, this is Derek. Let me just kind of go back. I'll try to recap some of the stuff we talked about in New York. We really gave a view on ASPs for 2014 2015 and then talked about we think that they're going to stabilize or moderate more longer term. And so we haven't given guidance all the way out into 2016, but if you kind of think back to some of the drivers that we still see us playing out over the longer term.
Right now, we think a lot of this is coming from an accelerated growth of emerging region volume, which we think will the relative growth versus developed will moderate over time. We also think there's going to be a replacement cycle over time in the developing regions. I think back in New York around increases in affordability and the amount of disposable income that people are willing to spend on their mobile device. And in fact, there was just a Boston Consulting Group report that was released last week in Davos That really underscored that. I think in India, it was about 45% of disposable income.
So what people would spend on their mobile device. China was around that same range, maybe a little lower. So we see a longer term picture where affordability and then people trading up as they move into the smartphone tiers will help actually stabilize or even increase selling prices in emerging regions. And then as we talked about on the with the Chinese OEMs, one of the things that's going on right now is basically share shift between non Chinese players to Chinese OEMs in China and other regions. And today that's coming at a lower ASP although we think over the long term that will stabilize as well as there's consolidation and these companies get a stronger position in the market.
Your next question comes from the line of rahmet shah with Nomura. Please go ahead with your question.
Yes. Thank you. Derek, you may have read that Apple and Ericsson are in a licensing dispute with Apple saying that among other things that should be based on the price of the baseband chip. And that sort of added to concerns that we may have this spillover effect from China into other regions. I was hoping you could talk about that.
And if you could just update us on when there might be some major contract renewals?
Okay. Why don't I take the first? I'll try very hard not to comment specifically on the litigation between Apple and Ericsson, given that they're both partners and customers. There have There have been, I would say efforts or arguments made for a number of years both in patent litigation as well as standards bodies that the appropriate royalty base should be the chip instead of the full device. Those have actually never succeeded anywhere where the argument has been made.
And even the damages law in the U. S. Is not consistent with that when you think about portfolio based licensing. So we'll have to watch this and see where it goes. But certainly the norm in our industry has been very much in line with the way that we have licensed historically and we think there's a lot of good reasons that support that long term.
Also, I don't want to comment too specifically on China. There have been obviously a lot of rumors and things in the press. But you even look at the Chinese OEMs that have disclosed how they might license their IP portfolios and they talk about licensing at the handset level, not the chip level. And some of the decisions that have come out of China in the legal system have been consistent with that as well. So there certainly will be arguments made over the years because there's a lot of incentives to make those arguments.
But at least as the law stands today, I think we're pretty comfortable with the way that we've structured our program.
Your next question comes from the line of Mark Hsu with RBC Capital Markets. Please go ahead with your question.
Thank you. Gentlemen, in the early stages of the smartphone market, it was really about getting your phones out to market, velocity of market, getting it out there. And so that favored the integrated solutions. Now with this concentrated market share and the increased choice of components, local competition in China, ban as the market further matures. Is this part of a broader trend to kind of unbundle and disintegrate components in flagship devices?
How should we think
it could be thinking about it over the longer term?
Mark, this is Steve. So I tell you, when we look at the accounts and we look at the competitive situation, I would really not make that conclusion. Most of in fact, without question, every competitive solution is trying to get to an integrated space. Part of that is in order to compete in the marketplace, you have to fit within an area and a cost target that without integration very, very difficult to do. There's really only one OEM that doesn't do that and does that well.
And they tend to play at a very high tier, which gives you a little bit more freedom not to do that. But the vast majority of units worldwide don't have that luxury. And so we tend to see everybody trying to produce integrated solutions.
Your next question comes from the line of Brett Simpson with Arete. Please go ahead with your question.
Thanks very much. Just on QCT at the high end the situation with the 8.10 share loss, is this really focused on one launch device with this OEM? Or will it be something that you see impacting other flagship launch devices with this OEM throughout the year? And just as a follow-up on QCT, I wanted to square this relationship you have with Samsung LSI. So on one hand, you're competing with Samsung LSI's Exynos chip.
And on the other, you're partnering with Samsung LSI on the foundry side for FinFET. So can you help us make sense of this? And how this isn't a dangerous position for Qualcomm? Why are you so confident this is good for the company? Thank you.
Sure. Brett, on your first question about the A10 in that particular in a particular account, I would think of it as isolated really to one account and one portion of their portfolio. I can't really talk about what would happen in the future. It's really a better question for them versus us. Broadly in the industry, I think we're quite pleased with the design traction and we just would love to see them take more share versus some other folks in the see the premium tier growing more would be great for that product I think is really the key.
In terms of the relationship with Samsung LSI and Samsung in general, it really hasn't changed. We've had a long standing relationship with Samsung across different things, whether it's licensing or our product business or the foundry or even our collaboration across mobile and different devices, we have a very broad relationship. I wouldn't think that there's a change in that and it's not a new relationship as well. As I've mentioned a number of times, the fact that Samsung now has a leading node tends to be something that's good for the Qualcomm business. It allows us to compete with other competitors in the marketplace.
So we have a very, very, intricate, but I think a good relationship with Samsung.
Thank you, everyone. Brent, please wrap up the call.